Equity / Mid Cap.

/ Banking

Bank Asya
Bloomberg: ASYAB TI
Reuters: ASYAB IS
ASYAB 2Q12 Earnings Review: Gradually unloading the provision burden
Net earnings were a tad below our estimate Lending growth prevailed in 2Q Improving asset quality took the heat off of provisioning trends Opex surged on new branch openings CAR remained resilient
Net earnings were a tad below our estimate. Bank Asya reported TL 54mn net earnings in its 2Q12 solo financials, which was slightly above the consensus estimate of TL 51mn but remained a tad below our house call of TL 56mn. In 2Q, bottom-line improved 9% QoQ (3% QoQ in dividend adjusted terms); carrying the 1H12 net earnings a mere 1% above on annual basis (down 2% YoY in dividend adjusted terms). Top-line was in harmony with our expectation however deviation mainly stemmed from higher than anticipated trading losses pertaining to swap valuations. In 2Q, remarkable slowdown in net new NPL formation was encouraging despite on-going backyard clean-up while surge in opex stemmed from rapid branch openings, which should prompt a revision in management guidance. Bank Asya shares trade at 7.8x on 12E NI and 0.7x on 12E BV vs. EM peers group average of 10.0x 12E P/E and 1.6x 12E P/BV. Lending growth prevailed in 2Q. Total loan book grew 8% QoQ solely driven by TL lending in 2Q. Growth was achieved in collateralised SME and housing loans coupled with FX-indexed loans and credit cards. On the funding side, 5% QoQ deposit growth was mostly driven by FX deposits. Blended LtD spread improved both on higher lending yields as well as resilient funding costs. But the improvement attained from the FX side as rise in TL deposit costs surpassed that of TL loan yields by 21bps QoQ in 2Q. Despite striking FX deposit growth, blended cost of FX deposits remained unchanged on quarterly basis. Overall, NIM continued to head north with 33bps QoQ expansion in 2Q. Coupled with lucrative IEA growth, NII improved 11% QoQ. Net fees were higher on quarterly basis, mainly driven by lending growth and re-pricing in non-cash loan yields. In 1H12, net fees increased a mere 4% on annual basis. Improving asset quality took the heat off of provisioning trends. In 2Q, net new NPL formation was negative thanks to stable NPL inflows, improved collections and TL 33mn of write-off within the period. Bank Asya continued to increase its loan loss coverage as it was 105bps QoQ higher at 55% in 2Q. The upward trend in coverage ratio will prevail into 3Q, presumably by hitting 60% level owing to on-going NPL clean-up and aging effect. Specific provisions eased 25% QoQ and the specific CoR contracted 69bps QoQ to 158bps in 2Q. Despite rapid loan book growth, resilience in close watch loans and shrinking non-cash loan book resulted in a mere 4% QoQ increase in general provision expenses. Overall, the NPL ratio eased 31bps QoQ to 4.1% in 2Q. 1

03/08/2012

Review of BRSA Solo 2Q12 Financials

MARKETPERFORM
Upside Potential*
Stock Data Price at 02 08 2012 12-Month Target Price Mcap (mn) Float Mcap (mn) No. of Shares Outstanding Free Float (%) Avg.Daily Volume (3M, mn) Market Data ISE 100 US$ Spot Rate US$ 12-Month Forw ard
Price Performance (%) 1 Mn

9%
US$ 1.06 1.15 951 494 900 mn 52.00

TRY 1.90 2.07 1,710 889

19.1

11.4 TRY 63,778 1.7982 1.9345

3 Mn 7 5 -2

12 Mn -21 -25 -25

TRY US$ Relative to ISE-100

6 6 3

Price / Relative Price

5.0 TL 4.0 3.0 100 2.0 1.0 50
ASYAB Relative to ISE 100

Relative

200 150

0.0 0 01-09 11-09 09-10 07-11 05-12

52 Week Range (Close TRY) 1.90 1.90

Bulent Sengonul
bsengonul@isyatirim.com.tr +90 212 350 25 66

Kutlug Doganay
kdoganay@isyatirim.com.tr +90 212 350 25 08

Please refer to important disclaimer at the end of this report.

Bank Asya
Opex surged on new branch openings. Bank Asya opened a total of 21 new branches in 2Q, one of which was abroad. The bank has reached to its full year branch opening target in 1H12, hence the management revised up its target by 15 more branch openings in the remained of this year, which should probably be concluded in 3Q. Overall, Bank Asyas opex surged 14% QoQ, which carried the 1H12 figure 15% above that of the previous year. In 2Q, swap costs also weighed on the bottom-line as the bank posted TL 2mn net trading losses vs. TL 11mn net trading income back in 1Q. CAR remained resilient. In 2Q, CAR declined 18bps QoQ to 13.47% backed with growth in collateralised lending and contracting non-cash loan book. The management guides for CAR lingering around 12.5-13% berth with the full implementation of Basel II rules, which bodes well with the desired asset growth in 2H12.

Bank Asya
Bank-only, BRSA (TL m n) Operating income Net interest income Commission income Net trading income Other income Provision expenses Operating expense Net income Bank-only, BRSA (TL m n) Banks Loans NPLs Securities Deposits Foreign funding Repo funding Shareholders' equity Total assets Loans/Total assets Loans/Deposits TL Loans/TL Deposits Securities/Total assets Non-core assets/Total assets Fixed assets/Total assets Equity/Total assets Borrow ed funds/Total assets Gross NPL ratio Loan loss reserve ROAE ROAA NIM Adj. NIM (trading & FX) Adj. NIM (trading, FX & LLPs) Yield on IEAs Cost of funds Spread Cost/income ratio Cost/Average assets Cost of risk, annualised
Source: Is Investment

2010 1,022 594 249 45 134 167 530 260 2010 187 10,955 447 474 11,167 622 0 1,942 14,513 75.5% 98.1% 130.1% 3.3% 1.0% 2.4% 13.4% 4.3% 4.0% 68% 14.2% 2.0% 5.2% 5.6% 4.1% 10.6% 5.8% 4.8% 54.3% 4.1% 110

2011 1,061 631 260 39 131 228 563 216 2011 359 13,154 616 858 12,397 1,458 279 2,137 17,190 76.5% 98.1% 130.1% 5.0% 0.9% 0.7% 12.4% 8.5% 4.6% 50% 10.6% 1.4% 4.8% 5.1% 3.4% 9.7% 5.0% 4.7% 55.1% 3.6% 141

YoY 3.8% 6.3% 4.2% (13.0%) (2.7%) 36.2% 6.2% (16.9%) YoY 92.6% 20.1% 37.7% 80.9% 11.0% 134.3% n.m. 10.1% 18.4% 104bps 0bps 0bps 172bps (10bps) (178bps) (94bps) 419bps 60bps (1,827bps) (365bps) (63bps) (44bps) (54bps) (79bps) (93bps) (82bps) (12bps) 88bps (51bps) 31bps

2Q11 241 150 62 9 21 32 138 55 2Q11 (139) 714 (4) (7) 234 374 263 57 1,110 77.1% 106.8% 139.2% 3.6% 0.9% 2.4% 13.1% 6.7% 3.5% 64% 11.0% 1.5% 4.8% 5.1% 4.1% 9.7% 5.1% 4.6% 59.3% 3.7% 81

3Q11 271 179 64 8 20 50 144 61 3Q11 42 995 54 305 595 447 395 59 1,596 75.8% 109.8% 151.8% 5.1% 0.9% 2.2% 12.2% 8.7% 3.7% 58% 11.7% 1.5% 5.3% 5.5% 4.0% 10.1% 4.9% 5.2% 54.8% 3.5% 116

4Q11 296 159 67 8 62 86 148 52 4Q11 220 113 125 (14) 519 (39) (378) 40 (22) 76.5% 106.1% 148.3% 5.0% 0.9% 0.7% 12.4% 8.5% 4.6% 50% 9.8% 1.2% 4.4% 4.6% 2.3% 9.5% 5.2% 4.3% 51.3% 3.4% 226

1Q12 304 192 66 11 35 95 146 50 1Q12 (154) 609 12 (203) 758 172 (279) 58 677 77.0% 104.6% 156.0% 3.7% 0.9% 2.5% 12.3% 9.1% 4.5% 54% 9.2% 1.1% 5.2% 5.5% 2.9% 10.3% 5.2% 5.1% 49.7% 3.3% 227

2Q12 320 213 69 (2) 37 84 166 54 2Q12 (89) 1,034 (1) 21 673 54 0 58 950 78.6% 107.0% 167.0% 3.6% 0.9% 0.6% 12.0% 8.9% 4.1% 55% 9.8% 1.2% 5.5% 5.5% 3.3% 10.8% 5.3% 5.4% 51.6% 3.6% 158

QoQ 5.3% 10.6% 3.8% n.m. 5.5% (11.3%) 13.8% 8.6% QoQ n.m. 69.8% n.m. n.m. (11.2%) (68.6%) n.m. 0.4% 40.3% 161bps 239bps 1,098bps (7bps) 1bps (190bps) (31bps) (17bps) (31bps) 105bps 53bps 4bps 33bps (0bps) 38bps 48bps 12bps 36bps 187bps 29bps (69bps)

YoY 32.6% 42.3% 10.9% n.m. 78.9% 168.1% 20.6% (2.0%) YoY n.m. 44.9% n.m. n.m. 187.3% (85.5%) (100.0%) 2.4% (14.4%) 150bps 24bps 2,786bps (4bps) (4bps) (185bps) (107bps) 223bps 59bps (964bps) (126bps) (29bps) 76bps 42bps (77bps) 111bps 28bps 83bps (774bps) (4bps) 77bps

Increm ental changes

Increm ental changes

ASYAB Estimated Financials Income Statement Net Profit Shares Income Net Income Balance Sheet Loans (net) Deposits Shareholders' Equity Ratios Ratios NIM ROAE Cost/Income NPL ratio Valuation metrics P/E x P/BV x

2010 594 260 10,955 11,167 1,942

2011E 631 216 13,154 12,397 2,137

2012E 820 249 15,384 13,980 2,391

2013E 903 244 18,383 16,530 2,622

2014E 1,065 290 21,415 19,830 2,900

6.0% 14.2% 51.9% 4.0% 6.6 0.9

5.0% 10.6% 53.1% 4.6% 7.9 0.8

5.2% 9.7% 50.8% 4.0% 6.9 0.7

5.1% 9.8% 53.0% 3.0% 7.0 0.7

5.1% 10.6% 51.9% 3.0% 5.9 0.6

Bank Asya

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